Guarantees

3 Months Ended

Mar. 31, 2020

Guarantees [Abstract]

Guarantees

Note 11—Guarantees

At March 31, 2020, we were liable for certain contingent obligations under various contractual arrangements

as described below. We recognize a liability, at inception, for the fair value of our obligation as a guarantor for

newly issued or modified guarantees. Unless the carrying amount of the liability is noted below, we have not

recognized a liability because the fair value of the obligation is immaterial. In addition, unless otherwise

stated, we are not currently performing with any significance under the guarantee and expect future

performance to be either immaterial or have only a remote chance of occurrence.

APLNG Guarantees

At March 31, 2020, we had outstanding multiple guarantees in connection with our

37.5

 percent ownership

interest in APLNG. The following is a description of the guarantees with values calculated utilizing March

2020 exchange rates: 

●

During the third quarter of 2016, we issued a guarantee to facilitate the withdrawal of our pro-rata

portion of the funds in a project finance reserve account. We estimate the remaining term of this

guarantee is

11 years

. Our maximum exposure under this guarantee is approximately $

170

 million and

may become payable if an enforcement action is commenced by the project finance lenders against

APLNG. At March 31, 2020, the carrying value of this guarantee was approximately $

14

 million.

●

In conjunction with our original purchase of an ownership interest in APLNG from Origin Energy in

October 2008, we agreed to reimburse Origin Energy for our share of the existing contingent liability

arising under guarantees of an existing obligation of APLNG to deliver natural gas under several sales

agreements with remaining terms of up to

22 years

. Our maximum potential liability for future

payments, or cost of volume delivery, under these guarantees is estimated to be $

640

 million ($

1.2

billion in the event of intentional or reckless breach) and would become payable if APLNG fails to

meet its obligations under these agreements and the obligations cannot otherwise be mitigated. Future

payments are considered unlikely, as the payments, or cost of volume delivery, would only be triggered

if APLNG does not have enough natural gas to meet these sales commitments and if the co-venturers do

not make necessary equity contributions into APLNG. 

●

We have guaranteed the performance of APLNG with regard to certain other contracts executed in

connection with the project’s continued development. The guarantees have remaining terms of up to

26

years or the life of the venture

. Our maximum potential amount of future payments related to these

guarantees is approximately $

120

 million and would become payable if APLNG does not perform. At

March 31, 2020, the carrying value of these guarantees was approximately $

6

 million. 

Other Guarantees

We have other guarantees with maximum future potential payment amounts totaling approximately

$

810

 million, which consist primarily of guarantees of the residual value of leased office buildings, guarantees

of the residual value of corporate aircrafts, and a guarantee for our portion of a joint venture’s project finance

reserve accounts. These guarantees have remaining terms of up to

five years

 and would become payable if,

upon sale, certain asset values are lower than guaranteed amounts, business conditions decline at guaranteed

entities, or as a result of nonperformance of contractual terms by guaranteed parties. At March 31, 2020, the

carrying value of these guarantees was approximately $

11

 million. 

Indemnifications

Over the years, we have entered into agreements to sell ownership interests in certain corporations, joint

ventures and assets that gave rise to qualifying indemnifications. These agreements include indemnifications

for taxes and environmental liabilities. The majority of these indemnifications are related to tax issues and the

majority of these expire in 2021. Those related to environmental issues have terms that are generally indefinite

and the maximum amounts of future payments are generally unlimited. The carrying amount recorded for

these indemnification obligations at March 31, 2020, was approximately $

70

 million. We amortize the

indemnification liability over the relevant time period the indemnity is in effect, if one exists, based on the

facts and circumstances surrounding each type of indemnity. In cases where the indemnification term is

indefinite, we will reverse the liability when we have information the liability is essentially relieved or

amortize the liability over an appropriate time period as the fair value of our indemnification exposure

declines. Although it is reasonably possible future payments may exceed amounts recorded, due to the nature

of the indemnifications, it is not possible to make a reasonable estimate of the maximum potential amount of

future payments. Included in the recorded carrying amount at March 31, 2020, was approximately $

30

 million

of environmental accruals for known contamination that are included in the “Asset retirement obligations and

accrued environmental costs” line on our consolidated balance sheet. For additional information about

environmental liabilities, see Note 12—Contingencies and Commitments.